Beware of bogus phone-bill fees

Consumers could be losing $2 billion to cramming each year

Find Ratings

Phone companies and federal regulators have taken steps to curb “cramming,” the placement of unauthorized charges on phone bills. But the new measures don’t go far enough, and they apply only to the dwindling number of landlines, not cell phones, which outnumber them by almost three times. So consumers must be extra vigilant in reviewing their mobile-phone bills for those fees.

Cramming works like this: Third-party providers of telecom services send their charges to aggregators that compile and send them on to phone companies to be added to customers’ bills. Some third-party billing is legitimate, such as charges for AOL, DirecTV, and Dish Network. But if you’ve been billed for voice mail, e-mail, Web hosting, or other services from unfamiliar companies that you didn’t order, you’ve been crammed. The Federal Communications Commission says that crammers rely on confusing phone bills to trick consumers into paying for services they didn’t authorize or receive, or that cost more than they were led to believe.

Half-measures

Earlier this year, the FCC adopted a rule that will require phone companies to notify landline customers about their option to block third-party charges—but only if the company offers it (they’re not required to). And the major phone companies agreed to stop accepting billings for certain products typically used for cramming—voice mail, Web hosting, and e-mail—by the end of 2012.

But in 2009 AT&T took the same action against voice-mail and Web-hosting services, and the Senate Commerce Committee concluded in 2011 that crammers adapted to such prohibitions by billing for other services, such as electronic faxing.

All of this points to potential problems for cell-phone customers as crammers focus on less-restrictive wireless accounts. But the trade association that represents cellular companies claims there is no threat. “There is no persuasive evidence that cramming is a widespread problem in the wireless industry,” according to CTIA-The Wireless Association, which says that it is concerned that mandated consumer protections will stifle the growth of mobile applications.

But plaintiffs who sued Verizon Wireless and other companies in a 2011 class action, which has since been settled, found plenty of activity—480,000 alleged cramming victims billed $12 million by the cellular giant, according to court filings. And the Texas attorney general is pursuing more than two dozen defendants in another lawsuit involving cellular customers who were crammed.

What you can do

Here’s how to protect yourself:

Block your accounts. The FCC estimates that 15 to 20 million landline customers are crammed each year, and the Senate Commerce Committee investigation concluded that phone companies were ineffective at stopping it during the past 14 years. So don’t rely on your telecom provider to weed out the charges. Instead, tell your wireless and landline carriers to block all third-party charges to your accounts.

Scour your bills. Only one in 20 cramming victims may be aware of the charges because consumers don’t know to look for them, according to a Federal Trade Commission survey. So check your monthly bills for small ($2 to $20) unauthorized charges with unfamiliar names or codes.

Get a refund. If you find unauthorized charges, call your carrier to demand a refund. Verizon now issues them “no questions asked.” AT&T pushes customers to first call the third-party company but will issue a refund if they insist.

Pay with a credit card. If you decide to download apps or shop by smart phone, use your credit card instead of having the cost put on your phone bill. Credit cards provide consumers with many protections, including the right to dispute fraudulent charges and get money back for goods or services not delivered as promised.

Guard your cell number. Often, a bad guy needs only your phone number to place a charge on your bill. Cell-phone numbers, which aren’t published in directories, are typically requested by crammers’ websites in exchange for freebies that are actually subscription sign-ups. A Consumer Reports staffer entered her phone number on an auction website in order to place a bid, and a $9.99 recurring subscription charge from the company showed up on her next AT&T Wireless bill. So it’s best not to give your cell-phone number to online contests, auctions, surveys, or giveaways.

Don't be misled. When our staffer called AT&T about the $9.99 charge, she was told that by ignoring a text message hawking the service, she had authorized the purchase. AT&T later told us she was given erroneous information, something we already knew. Cellular industry guidelines say that consumers have to agree to such charges in two separate actions before they’re allowed. So make sure you demand your money back if you’re a victim of this billing trick.